As the new price cap comes into force this year, energy consultancy Cornwall Insight has predicted further increases for the year ahead.
The April cap, which will be officially announced in February, is now expected to be £1,785 a year for a typical dual fuel consumer. This is a 3% increase on January’s cap of £1,738 a year. The energy price cap establishes the maximum rate that energy suppliers can charge customers for the standing charge and unit cost of electricity and gas supplies.
The price cap for the current period, which runs until March, was a 1.2% increase on the previous period, however is still lower than January-March 2024 and 57.2% lower than the peak of the energy crisis in January–March 2023, when the cap sat at £2,321 for the average household.
Early December saw a slight dip in wholesale energy prices, driven by easing supply tensions in Europe. Prices rebounded slightly later in the month as uncertainty over the Ukraine transit deal and the higher level of withdrawals from EU gas storage facilities.
These factors combine with a second Trump presidency, which has raised uncertainties around US LNG export plans. As such, Cornwall Insight said it expects its price cap forecasts to display a high degree of variability.
Dr Craig Lowrey, principal consultant at Cornwall Insight, said the level of volatility in wholesale markets hasn’t been seen for months, serving as a reminder to “remain cautious of predictions, which could very well increase or decrease several times before the April cap is set”.
Cornwall Insight had already suggested that bills would increase from April, forecasting that the price cap could go up by 1% compared to the current period, in part blamed on Ofgem’s potential price cap reforms that could take effect in April.
The reforms include the potential incorporation of allowances to cover the Energy Intensive Industries (EII) network exemption, which would add as much as £20 per year to the average consumer’s bill.
Lowrey added: “Ultimately, the security of energy supply, and Ofgem’s evolving policies will shape the trajectory of bills as we move into 2025 and beyond. It’s crucial for policymakers and industry stakeholders to work together to ensure fair and sustainable energy pricing for households.”
Cornwall Insight said it is expecting July’s price cap to fall from April’s as Ofgem explores cost measurement adjustments that could reduce bills by £10 or more. In December, the energy regulator published an update on its review of standing charges, after responses to its call for input painted a “stark picture” of users’ dissatisfaction with the current system.
